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Issues Involved:
1. Proper construction of the partnership deed. 2. Valuation of the deceased's share in the partnership assets. 3. Applicability of the provisions of the Estate Duty Act, 1953. 4. Determination of market value vs. deed value. Detailed Analysis: 1. Proper Construction of the Partnership Deed: The primary issue was the interpretation of the partnership deed dated April 22, 1946, specifically whether the value of the deceased's share in the assets of the firm should be estimated according to the provisions of the deed or the market value at the time of death. The partnership deed included clauses that restricted the transfer and valuation of a partner's share upon death or retirement, emphasizing the cost value of assets rather than market value. 2. Valuation of the Deceased's Share in the Partnership Assets: The accountable persons valued the deceased's interest in the firm at Rs. 15,86,089 based on the partnership deed's provisions, while the Assistant Controller revalued the assets at market value, resulting in a higher valuation of Rs. 1,09,62,010. The Assistant Controller argued that the market value should be used for estate duty purposes, rejecting the deed's restrictions. The Appellate Controller, however, upheld the deed's provisions, stating that the valuation should follow the clauses of the partnership deed, which governed the deceased's rights and interests. 3. Applicability of the Provisions of the Estate Duty Act, 1953: Sections 5, 7, and 36 of the Estate Duty Act were crucial in this case. Section 5 stipulates the levy of estate duty on property passing on death, Section 7 deals with interests ceasing on death, and Section 36 provides the method for estimating the principal value of the property. The Tribunal concluded that Section 7 did not apply, and the valuation should be based on the market value as per Section 36, but considering the deed's restrictions. 4. Determination of Market Value vs. Deed Value: The Tribunal held that the valuation must consider the deed's restrictions, as the deceased's share could not fetch a higher price than what was stipulated in the deed. The Tribunal referred to the Australian High Court's decision in Perpetual Executors and Trustees Association of Australia Ltd. v. Federal Commissioner of Taxation, which emphasized valuing the property with all conditions and restrictions attached to it. Conclusion: The High Court agreed with the Tribunal that the partnership deed's provisions should not be ignored in valuing the deceased's share but clarified that the valuation must still be made based on the market value, considering the deed's restrictions. The court remanded the matter to the Tribunal for valuation in accordance with this interpretation. The valuation should reflect what the share would fetch in the open market, taking into account the deed's conditions. The parties were ordered to bear their own costs.
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